Officials of the three global funding agencies have criticised the state government for diverting large amounts of funds towards subsidies and grants. Representatives of the multi-lateral financial institutions made these remarks at a recent meeting with a visiting state business delegation in the US.

"The institutions believe that the populist policies of the state government have been hampering industrial and economic growth," said Indian Merchant Chambers' foreign trade committee chairman Dinesh T Parekh, who was a part of the delegation.

There was general disappointment on the speed of economic reforms in the country, but Maharashtra was singled out considering its enormous growth potential. Maharashtra being a prominent industrial state could contributesignificantly towards the country's economic development, but it has failed to register the expected growth even at the state level because of the laid back attitude of the government, they said.

Present on the occasion was also IMF executive director MR Sivaraman, who happens to be former revenue secretary of India. He critised the state's slow implementation of policies.

The financial institutions have put investments in the state on hold until it takes remedial steps, said IMC chairman YP Trivedi, who had led the delegation.

"This is because of the fear that given the state's present financial position, it may not be able repay the debt," said Trivedi. The World Bank and IFC officials lamented the progress of the state, he added.

It is to be noted that the World Bank had earlier terminated a loan to the Maharashtra State Electricity Board as the board could not reduce the receivables to the agency's prescribed limit.

Poor performance of the core sector came up for particular mention by theofficials because a lot of hope had been generated for foreign and private investment in this sector.

Frequent policy changes and bureaucratic delays have, however, caused apprehension among investors, said Parekh. Foreign investors have also been reluctant to make large investments in infrastructure projects, he said, adding that political uncertainty has added to the skepticism.

"We had to defend the government for several prevalent problems such as corruption and extortion," said Trivedi. There is an opinion that the government is implementing policies to please some sections of the society to remain in power which will prove hazardous for the country's growth in the long run, said Trivedi.

INSIGHT
Rework subsidy policy

The World Bank's concern about state finances comes at a time when free power to agriculture is yet to become a reality. Crisil too recently downgraded the state's credit rating, and unless the state government gets it act together, it will be hard pressed tocomplete development projects. Obviously, funding from the private sector will be costlier and harder to get. The higher capital cost will be reflected in the pricing of infrastructure facilities, unless the policy towards subsidies is changed. While corrective measures are desperately required, the state's track record on this has been poor.